Analysis

Partnerize’s Acquisition of Pepperjam: Impacts, Challenges, and What to Expect

July 30, 2020

Summary: Partnerize acquired Pepperjam, marrying Partnerize’s sophisticated technology and global presence with Pepperjam’s in-house service, ease of use, large publisher base and US market presence. This helps Partnerize to make a bet that brands want better tech, but don’t want to ditch the traditional combined network plus service model. 

 

Will that be enough to stabilize the industry and offer clear product choices? An online discussion with the Martech Record experts concluded the following:

How big is the combined Partnerize and Pepperjam? 

The Martech Record Affiliate Industry Platform Presence index indicates that Impact has a 27% Share of Presence, while Partnerize and Pepperjam have 10% and 7% respectively. A combined Pepperjam & Partnerize is ⅔ Impact’s presence, enough to make the bigger players think about the appropriate response.

What does it mean for the partner marketing industry?

The amplified Partnerize offering has the following effects on partner marketing:

  • Platform product offerings are clarifying: This acquisition might finally clarify a third option in the market: Combined Saas + service. This would give brands who don't want to ditch the all-in-one offering but want to upgrade to sophisticated technology a middle of the road option that does not rock the boat internally. 

  • More data: Consolidation means fewer walled data gardens and potentially more transparency around commissions and media opportunities. Pepperjam has shown a willingness to expose their data to the public, which could create useful industry benchmarks. 

  • Pricing: Networks and platforms have been in a price war for years. Martech Record’s 2020 Expert Survey indicates there is little understanding of current pricing models among buyers. Consolidation may help stabilize pricing and create some transparency.

  • The broader partnership market: Despite the promise that affiliate marketing is actually a much bigger market, encompassing everything from influencers to strategic B2B relationships, it’s not clear how this acquisition helps capture the broader market. To do so means being able to develop a go-to-market strategy for sales leaders, strategy teams, and public relations executives. This acquisition does not enable any of those objectives. 

 

What does it mean for a combined Partnerize/Pepperjam?

The acquisition could have several implications for the future of the company. They include:

  • The combined company has an opportunity to build a clear go-to-market by targeting brands that want sophisticated technology but not ditch the CJ & Rakuten service model.

  • Partnerize addresses a big weakness by acquiring Pepperjam’s publisher base.  

  • Partnerize can diversify away from travel during covid and be relevant in the US market. 

  • Pepperjam now has a global reach. 

  • The combined marketing departments could be a win. Partnerize has always been very lead /sales-focused, where Pepperjam has done an excellent job leveraging their data as a marketing tool. A data first brand with strong lead gen could be an effective position against the legacy networks. 

Challenges:

With the benefits of the acquisition of Pepperjam, there are also a few things to watch out for. They include:

  • Execution: neither Partnerize nor Pepperjam have consistently executed a clear strategy for an ongoing period. It’s not clear why a combined management team would be able to do that now. But, with a clear differentiator, they have an opportunity to prove they are capable. 

  • Integration: they will have to go all-in quickly.  There is no point in separating Pepperjam’s superior usability and publisher base and Partnerize’s under the hood sophistication. And the investments in automation that are sure to follow and would need to be built into a combined platform. 

  • What does Impact do? Will Impact compete and risk alienating their agency channel or will they continue to strengthen the channel, betting that a large part of the market will want to separate technology and services like other digital channels?

  • What do CJ and Rakuten do? Likely nothing. They will rely on their brands and industry inertia to maintain their market positions and hope that Partnerize/Pepperjam cannot execute. 

  • Fractured market: Despite this acquisition, the market is still extremely fractured, engaged in price wars, and actively limiting access to publishers. It’s not clear this acquisition is big enough to make a difference.

 

What’s next in partner marketing?

The Pepperjam acquisition is a big move in the partner marketing industry. However, this shift might not be as momentous as it is simplifying. These are our industry predictions:

  • More acquisition: It’s still a crowded market, where the leader only owns 27% Share of Presence. Price pressure and high transaction costs will drive more consolidation at the platform and service level.

  • More investment in automation / AI: If Partnerize/Pepperjam are going to put a stake in the ground as a combined SaaS/Service option, they will have to find a way to lower the cost of service. This likely means more investment in automating publisher discovery and commissioning recommendations. 

  • Global consolidation: The fractured nature of the US market is even more extreme globally. Look for the next wave of consolidation on a global level. 

  • Talent poaching: Partnerize/Pepperjam will try to pluck away key account managers from CJ and Rakuten in an effort to ease transition worries from potential clients . Time to check your non-competes. 

A fractured market needs consolidation, clarity, and transparency. It’s not clear this is enough. It is more likely there is more to come. 

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